There has been a lot of talk about R as of late. Now I know that nobody reads this but I’m still going to get this off my chest. There is several ways to view your trading results. The end one is how much did you make in a year based off what you started with – % Return. The trick is that you can use several other measures to understand how that % return was achieved. R, better know as R Multiple, is one of these other measures. It holds a lot of useful information in understanding how well you are trading and controlling your risk.
People who don’t use stops can not understand this relationship due to the fact they have no true understanding of the risk they are taking on any one trade. You can go ahead and trade that way if it fits your style. I’ve blown up one account already and will not let it happen to me again, so I fall into the camp of understanding my risk on every trade. I also pay very close attention to my risk on my over all account.
So to those of you who seem to like to beat this concept up my question is this – “Do you understand your risk on your trades?” and “If you don’t, then have you ever blown up in the trading world.” If you answered no to the two above question then you might want to go read so articles about how to handle big loss. They are coming. It not if but when.
I just found a great link that I have to read. The title tells it all – How to F$@# Up a Trade Set Up .
